OTC (Over-the-Counter) refers to transactions that occur directly between two parties without being traded on a formal exchange.
In the industry, OTC transactions are commonly used in the trading of securities, such as bonds, stocks, and derivatives. These transactions are typically negotiated between two parties through a dealer network or electronic marketplace, without being reported to a centralized exchange.
OTC trading can offer more flexibility and customization in contract terms than exchange-traded securities, but it is also subject to greater counterparty risk since the transactions are not regulated by a central authority.
The use of OTC transactions has grown in recent years, with a significant portion of global derivatives trades now occurring over-the-counter. However, they have also come under scrutiny for their role in the 2008 financial crisis. In response, regulators have increased oversight of OTC markets in an effort to minimize systemic risks.
OTC
Economy Term
OTC (Over-the-Counter) refers to transactions that occur directly between two parties without being traded on a formal exchange.
In the industry, OTC transactions are commonly used in the trading of securities, such as bonds, stocks, and derivatives. These transactions are typically negotiated between two parties through a dealer network or electronic marketplace, without being reported to a centralized exchange.
OTC trading can offer more flexibility and customization in contract terms than exchange-traded securities, but it is also subject to greater counterparty risk since the transactions are not regulated by a central authority.
The use of OTC transactions has grown in recent years, with a significant portion of global derivatives trades now occurring over-the-counter. However, they have also come under scrutiny for their role in the 2008 financial crisis. In response, regulators have increased oversight of OTC markets in an effort to minimize systemic risks.